- Muselman v. Deutsche Bank, U.S. Bankruptcy Court | A Valentine from Chief United States Bankruptcy Judge Karen S. Jennemann on Feburary 14, 2012
- MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Appellant, v. LISA MARIE CHONG, LENARD E. SCHWARTZER, BANKRUPTCY TRUSTEE
- Misbehavior and Mistake in Bankruptcy Mortgage Claims
Apr
13
Recovery | Tax Refunds Being Used to Pay for Bankruptcy Filings
Tax refunds being used to pay for bankruptcy filings Some Americans spend their tax refunds on high-tech gadgets and long-awaited vacations. Others use the cash to file for bankruptcy. More than 200,000 money-strapped households will use their tax refunds this year to pay for bankruptcy filing and legal fees, says a new study by the … Read more
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Feb
27
Bank sues itself, wins, and then forces itself into bankruptcy to satisfy judgment
During the mortgage madness of 2003 – 2006, banks wore many hats related to the complex derivatives and mortgage-backed securities being packaged and sold to investors all over the world. Then, the meltdown forced many mortgage originators into bankruptcy and saw numerous financial institutions become insolvent. When the surviving banks acquired the various assets of the fallen… it became difficult or in some cases near impossible to ascertain from where certain risks might come.
Of course, the banking lobby has successfully resisted efforts aimed at breaking them up into more manageable entities, less capable of causing systemic damage to the global financial system. The industry’s position seems to be that every thing is just fine. Goldstein Such’s CEO, Lord Blankcheck, speaking at the dedication ceremony of the American Securitization Memorial, had the following to say…
“The size of our financial institutions is not the problem. Just because in some instances I have not been aware that we created a market in which we took a significant position and then on another floor were aggressively shorting that position, should not be a cause for concern. Remember, when that happened last year, we were able to unload our position as soon as we discovered it, and it was the Germans who ultimately took the hit. That’s what we mean when we say our systems are both agile and resilient.”
Critics, however, point to a recent case involving HPMagnum Chaste who, after acquiring the assets of Snare Burns and Punxsutawney Federal, buying some of the default servicing rights of Hemann Bros., the trustee division of Bakeley’s, a pool of loans once owned by World Slavings that had been originated by Dog Beach Mortgage before being sold to Dowdy Savings & Moan, which was later acquired by USA Bunko, and then buying Credit Default Swap counterparty positions once owned by Goldstein Suchs, but used as collateral for repo agreements involved in the hedging of assets tied to the commercial paper markets, until in 2008, the global financial behemoth began to arbitrage by becoming the bond holder and master servicer of a sub-set of loans that had been originated by Countrywide before BofA sold put options and preference shares to Morgan Stanley under an agreement whose terms may not be disclosed.
Apparently, Citibank was serving as trustee for the mezzanine tranches of some of the loans, and was the investor in the AA- 2-year CDO squared, but says the bank hired Wells Fargo to short AIG in order to protect itself from volatility in the asset-backed commercial paper market and the possibility of margin calls resulting from exposure to default by Greece, if it occurred in the third quarter of 2011, but through leveraging inverse interest rate swaps against bonds offered by Wachovia, through Merrill Lynch as trustee, IndyMac ended up as custodian, and servicer, with Deutsche as depositor.
In a bizarre twist of fate, when a homeowner is Shitsburgh, Tennessee lost his job at the local crayon manufacturing plant, and failed to make three months of mortgage payments, the entire structure unwound like a spring load bear trap, causing Moody’s to downgrade the country of Luxembourg from AA- to BB+, which forced MBIA to file for bankruptcy protection, and one of Jamie Dimon’s vacation homes to be sold at a trustee sale.
Goldman Sachs, however, says that it will record an $11 billion profit from the compound transaction although a spokesperson from the investment bank says the firms is not yet exactly sure why. “We know it’s a gain,” said Mimi Guffaw, a partner in charge of Goldman’s Double-barreled Default Anticipation Yield desk, known as D-DAY. “It’s always a gain. We just can’t put our finger on precisely where it’s coming from.”
The Tennessee homeowner says that the whole thing started when his bank called him to tell him that he qualified and should apply for a loan modification. He tried to explain that he had just bought the home a couple months back and had paid cash, but the Citibank representative said that it didn’t matter he would be receiving a Notice of Default later that month if he didn’t apply, or agree to pay 14 years of back taxes on the adjoining lot owned by a Danish concern.
In a related story, Bloomberg News is reporting that senior partners from cordovan loafer law firm, Mammoth, Pervasive & Bland LMNOP will testify in front of Senators Shelby and Bachus, along with several other members of the powerful Senate Banking Committee. The two partners, Godim Pervasive and Arenti Bland told the senators that the new regulations imposed under Doss Frank requiring banks to keep track of their capital positions and disclose derivatives that leverage defaulting sinking funds with option-adjusted durations, are far too onerous and if not repealed, will make our nation as a whole unable to compete globally and deprive hundreds of thousands of retired rail workers of their dental plans.
Heinreich Svenerrrson Bjork-Hadern, Assistant Monday Morning economist for the International Literary Fund said they are studying the problem carefully, but at this point all they could say with certainly is that either Spain is on much more solid financial footing than previously assumed, or Canada has unexpectedly just gone into default, causing firefighters in Muncie, Indiana to ask AIG for $4 billion in collateral and leaving U.S. taxpayers to pick up the tab.
President Oblabla held a press conference to try and calm global currency markets by introducing the head of his new Global Asset and Confounded Equity Derivatives Exposure Security Task Force, known as GAACEDESTF. No one noticed, however, and the president went to play golf with Herman Cain.
The Treasury Department is trying to unravel the global conflagration taking place in the over-the-weekend debt markets, which nobody had ever heard of, but apparently are crucial to keeping the power grid functioning in the mid-Atlantic states. Former SIGTARP Neil Barofsky has promised to try to figure things out, but again suggested that in the future Ben Bernanke refrain from accepting baseball card collections as collateral for loans made by the Federal Reserve, that the too-big-to-fail banks not be allowed to do more than three or four things at a time, and that leverage of 200,000 to 6 is taking things a bit far.
Bernanke says he doesn’t see the problem, noting that the Fed didn’t actually take possession of the baseball cards in question; rather it created a new form of security that is being called a “Promise to Insure Structure and Securitize.” Bernanke claims that by accepting PISS as collateral, the Fed is protected from fluctuations in the commodities markets that might otherwise lead to hyperinflation once oil prices have collapsed and the ongoing deflationary spiral has stalled.
“If something goes wrong, we won’t have the exposure that we might have had were we to be holding the actual cards, Bernanke explained. Under this structure, no matter what happens, all we’ll have as collateral for the loans is the PISS.”
Bernanke closed by saying that he thinks the U.S economy remains strong, even though the reverse opportunity swaps now secured by the Social Security Trust Account will like cause the Singapore Sovereign Wealth Fund to foreclose on The second and third floors of The White House sometime this summer.
Clearly, the obfuscation of information conveyance from financial institutes to the end consumer is a paradigm best explained by specialist terminology synergizing with superfluously convoluted modes of communication.
# # #
So, why did I write this? Because it makes just as much sense as everything else that’s going on in this country, and at least it made me smile.
Mandelman out.
Aug
24
Mass. Bankruptcy Judge Voids Foreclosure of MERS Mortgage – Judge Tells Lenders You Can’t Have Your MERS Cake & Eat It Too
Mass. Bankruptcy Judge Voids Foreclosure Of MERS Mortgage Judge Tells Lenders You Can’t Have Your MERS Cake & Eat It Too The sophisticated financial minds who wrought the MERS regime sought to simplify the process of repeatedly transferring mortgage loans by obviating the need and expense of recording mortgage assignments with each transfer. No doubt … Read more
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Aug
17
Bankruptcy Judges & DOJ Rip Mortgage Companies
Below is another story about Servicer abuses… At least some judges see the issues and are not allowing personal viewpoints or prejudices to cloud their assessment of how terrible the situation is for a homeowner in mortgage hardship or distress.
The servicers are also the main players in the massive foreclosure fraud that is occurring around this country.
One would think that at some point, the legal system is going to stop the train of abuses justice suffers because of the systemic fraud that is committed by servicers trying to foreclose on homes they have no financial stake in.
Bankruptcy Judges & DOJ Rip Mortgage Companies
by Karen Weise, ProPublica
“Systemic abuse.” “Extraordinary incompetence.” “Reckless.” In a growing body of legal cases, judges and the Justice Department are breaking from legal jargon to starkly chastise mortgage companies.
As mortgage delinquencies rise, more and more homeowners are learning the central role that mortgage servicers play in their lives. The legal cases show that role can be distressing. Judges have found that major mortgages servicers regularly mess up basic accounting, improperly credit payments and charge unwarranted fees. They’ve “not done a very good job of keeping the records,” said Judge Samuel Bufford of California.
Mortgage servicers — typically either bank subsidiaries or independent companies — handle the day-to-day work with homeowners, ranging from collecting monthly payments to determining when to modify or foreclose. Problems with servicing often, but not always, occur once homeowners start having trouble making payments.
Complaints to the government about mortgage servicers have soared in recent years. They’ve risen from 31 percent of the complaints that the Department of Housing and Urban Development received in 2006 to 78 percent in 2008, according to HUD spokesman Lemar Wooley.
Problems Exposed in Bankruptcies
Many homeowners in bankruptcy have legal representation and must settle claims with servicers. As a result, the process has revealed and documented a slew of servicer problems.
In many rulings, judges have shown frustration and even outrage. They’ve ruled that servicers have attempted to collect unjustified fees, charged homeowners for unnecessary insurance, failed to properly credit homeowners’ payments and failed to provide evidence to back up fee requests. In most cases, judges demand that servicers fix the problems and unwind the unjustified fees; sometimes, judges award damages and attorneys’ fees. In one extraordinary case, a judge issued $750,000 in emotional and punitive damages. (We’ve compiled five sample cases and rulings for you to see here.)
Take the case of Donald and Phyllis Moffitt of Arkansas. In June 2008, bankruptcy Judge Audrey Evans issued a restraining order against America’s Servicing Company, a division of Wells Fargo, saying it must stop attempting to collect payments that the Moffitts did not owe. In a 41-page ruling (PDF), the judge wrote:
“The evidence supports the premise that ASC’s servicing procedures, as exemplified by the Moffitts’ account, are not organized to assure accuracy and accountability. … ASC misapplied these payments, failed to record the correct information even though Mrs. Moffitt constantly called and talked to ASC’s agents, failed to follow her written instructions, failed to communicate with the Moffitts, sent mortgage statements that were incomprehensible and frightening, began collection calls, and engaged in a litany of mismanagement of the Moffitts’ loan.”
Wells Fargo did not respond to a call for comment.
A 2007 study looked at a majority of Chapter 13 bankruptcy filings in 2006 and found that in 70 percent of the cases studied, mortgage companies claimed homeowners owed an average of $6,309 more on their loans than homeowners believed.
Problems with servicing are not limited to families filing for bankruptcy, Katherine Porter, an author of the study and an associate professor at the University of Iowa’s law school, testified before Congress last year. She said servicers commonly foreclose when they do not have the legal right to do so, impose unwarranted or illegal fees, and miscalculate how much families owe.
In several instances, judges have taken broad action to address persistent problems with a servicer. This May, Judge Elizabeth Magner in Louisiana said her review of multiple cases involving Ocwen Loan Servicing had shown the servicer regularly acted in “bad faith.” The judge said Ocwen had charged improper fees and attempted to collect bankruptcy-related fees after the court closed a case. In one of the cases, Ocwen took 10 months to provide a full accounting of fees.
The judge wrote that Ocwen’s “systematic abuse” required more than monetary sanctions, which had not stopped the behavior in the past, so Magner issued an order (PDF) forcing Ocwen to follow specific accounting procedures. (We’ve noted before that Ocwen’s servicing procedures have raised eyebrows in the past). Ocwen’s general counsel, Paul Koches, said the company disagrees with the ruling and is pursuing an appeal in U.S. District Court.
Justice Department Takes Action
The Justice Department’s United States Trustee Program is a watchdog over the bankruptcy process. Its 21 regional offices oversee more than 1,300 private trustees who mediate between debtors and creditors in individual bankruptcy cases.
The Trustee Program’s annual report said combating servicer abuse (PDF) was a top priority last year. The program initiated 68 actions (PDF) against what it calls “systemic abuse” by mortgage servicers, including 25 large servicers such as Countrywide, HSBC and JPMorgan Chase, according to public documents (PDF) and speeches (PDF). The Trustee Program has sued Countrywide in at least six states.
Countrywide, now owned by Bank of America, is the largest participant in the federal Making Home Affordable program to modify troubled mortgages. A recent analysis by the Associated Press found that at least 30 of the 38 mortgage companies that have signed up for the program have been sued over their servicing practices.
In response to one U.S. trustee’s suit in Ohio, Judge Marilyn Shea-Stonum ruled in May (PDF) that Countrywide had charged fees with “no factual basis” and wrote: “Countrywide’s system is reckless. It appears to me designed to allow each actor in the process to act with indifference to the truth, and to rely solely on the limited information made available at each step. … [The errors in this case] evidence Countrywide’s disregard for diligence and accuracy.”
The judge is currently determining monetary and other sanctions. Countrywide spokeswoman Shirley Norton said, “We are reviewing the ruling and considering our options.”
Private trustees have sued servicers as well. Debra Miller, a private trustee in Indiana, has been active in litigation where servicers haven’t complied with federal regulations. Typically, she said, private trustees try to obtain settlements that are more about changing practices than monetary compensation. “Our job is to force mortgage companies to improve their systems,” she said.
Both the Justice Department and private trustees have stepped in to fill what they see as a regulatory void covering mortgage servicers, according to Andrea Celli, a private trustee in upstate New York.
Future Oversight Under Debate
Currently, a hodgepodge of agencies oversees mortgage servicing. HUD, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Trade Commission and the Federal Reserve all have partial authority.
Concern over mortgage servicing was part of the early discussions about the proposed new Consumer Financial Protection Agency, according to Eric Stein, the Treasury Department’s deputy assistant secretary for consumer protection. The CFPA, as proposed by the Obama administration, would be the primary watchdog for servicer abuses.
Servicers are resisting the new consumer agency. Paul Leonard, a lobbyist for the Financial Services Roundtable, said his organization’s members believe that there should be better coordination among regulators and that existing agencies can handle the responsibility.
Tara Twomey, a lecturer at Standford Law School who co-authored the large study of bankruptcy cases, says that more regulation would help, but it would only be a “Band-Aid.” “The more fundamental problem is one of market structure,” she said. “Borrowers don’t get to choose their servicer.”
Aug
10
How To Avoid Foreclosure By Declaring Bankruptcty
” Over 3 million people are 60 days behind in their mortgage payments with little hope of finding a quick solution. This has caused many borrowers look for somewhat imaginative measures to save their home, one of these has been declaring bankruptcy to avoid a mortgage foreclosure. Does this work? Is it legal?”
